Cyprus warns IOCs against working with TPAO

LOS ANGELES, Apr. 14 -- Cyprus issued a warning to international oil companies against working with Turkish Petroleum Corp. (TPAO) in certain areas off the Mediterranean island.

The warning came as Cyprus was named by investment bank UBS as a possible site for a LNG terminal to receive gas from recently discovered fields off Israel.

“TPAO purports to hold licenses for exploration [and] exploitation of hydrocarbons in 11 blocks in the eastern Mediterranean,” the Cypriot ministry of foreign affairs said.

But the ministry added that Cyprus “has not granted any license or any rights to TPAO” regarding Block 4321, which Nicosia regards as part of its exclusive economic zone.

“The license that TPAO purports to be holding has apparently been granted by the Republic of Turkey,” the ministry said, adding that Ankara has shown “complete disregard” for the provisions of the United Nations Convention on the Law of the Sea.

The ministry said Cyprus, in conformity with the UN law, has entered into agreements with three of its neighbors over the delimitation of maritime borders in the region, but not with Turkey.

As a result, the ministry said it is “simply unacceptable” for Turkey to offer licenses that would “preempt the outcome” of future negotiations in view of achieving such an agreement.

“The Republic of Cyprus reserves all its rights and will take any necessary action to protect its interests against any trespassers,” the ministry said. [Native Advertisement]The warning came as UBS suggested an Israeli LNG terminal on Cyprus would be the best way to monetize recent gas discoveries in the eastern Mediterranean.

“We believe the Leviathan partnership is looking closely at the possibility of establishing a LNG facility in Cyprus, given that Leviathan [gas find] is located halfway between Israel and Cyprus,” UBS said in a research report.

“Since Tamar can fulfill Israel's gas requirements for the foreseeable future, the Leviathan output will be directed at the export market,” it reported, referring to the two main gas fields discovered off Israel.

The report said the two main alternatives for exporting Israeli gas to Europe or Asia are deploying a pipeline to Europe via Turkey or Greece, or setting up an LNG plant in Israel or Cyprus.

“Monetizing Leviathan requires a more challenging export mechanism of a pipeline or LNG,” UBS said.

“We believe a pipeline to Turkey is less relevant in the current geopolitical climate, and a pipeline to Greece would prove too costly and technically prohibitive” UBS said.

In January, Noble Energy Inc. reported an apparently major gas discovery with its Leviathan exploration prospect. "This discovery has the potential to position Israel as a natural gas exporting nation," said Nobel Pres. and Chief Operating Officer David L. Stover (OGJ Online, Jan. 10, 2011).